Housing study offers regulatory solutions to Missoula’s affordability challenge

Construction workers build a new apartment complex at South Avenue and Brooks Street. The city’s housing stock is in short supply and the cost of housing continues to climb. (Martin Kidston/Missoula Current)

Missoula’s population grew nearly 6 percent between 2010 and 2015 and the labor market added thousands of new jobs over the past decade. At the same time, housing prices soared to record highs and the affordability gap widened.

While such statistics aren’t new to most Missoula residents, solutions have been elusive, though it’s not too late to reverse the trend.

“You guys aren’t so far gone that you can’t do a robust response and get this under control,” said Daniel Werwrath. “You’re on the cusp of a bad situation, but it hasn’t totally gone over the waterfall.”

Werwrath of Werwrath Associates unveiled a comprehensive study of the local housing market on Tuesday, offering a deep look at economic trends, demographics and issues around affordability.

Commissioned by the Missoula Organization of Realtors and nearly a year in the making, the 159-page report cited the city’s lack of affordable housing as a growing barrier for both renters looking to make ends meet and prospective buyers looking to enter the market.

“Diverse strategies and collaboration are going to be key here,” Werwrath said. “There’s no one silver bullet for housing affordability in the West. Solutions are going to take a little investment from a lot of people.”

According to the study, sales of all homes priced under $200,000 decreased 40 percent between 2007 and 2016, while detached homes listed below $200,000 decreased 46 percent just in the last two years.

Given the cost of housing, the rate of homeownership in Missoula stands 19 percent below the state average and 16 percent below the national average. The vacancy rate for rentals remains tight.

“Rental housing vacancy rates are your biggest indicator,” Werwrath said. “You’ve consistently been below a 5 percent vacancy rate for years. This is the threshold at which you’re really in a tight market and can expect to see escalating rents.”

Whether paying rent or a mortgage, 41 percent of Missoula households spend more than 30 percent of their income on housing, though the trend is especially skewed toward renters, with nearly 69 percent considered cost burdened.

Werwrath said those paying more in rent have less expendable income as a result. The lack of opportunities to purchase a home also hinders the region’s economic growth. Young professionals move to less expensive communities and thousands of potential home buyers sit on the sidelines.

“Defining affordability is one of the most important platforms to developing a robust community response to affordable housing needs,” Werwrath said. “You’ve got a great pipeline of adding housing, but it hasn’t quite gotten ahead of the demand part of it at this point.”

Addressing an audience of several hundred people at the downtown forum, Werwrath said the survey found wide consensus around a willingness to pursue a city-county strategy to address affordable housing.

Among the solutions, 92 percent agreed that local government should provide development incentives for the creation of affordable housing. Other approaches included direct investment in public funding and the donation of public land earmarked for the construction of affordable housing.

“The highest approval rating was the idea of creating regulatory incentive packages to create more housing affordability,” said Werwrath. “It’s an interesting thing to keep in mind; there’s broad public support for doing something about these issues.”

Werwrath said city and county regulations offer some provision for affordable housing, though they’re “pretty light” and not well defined. Whatever incentives are currently offered, he said, lack meaningful assets to offset the rising costs of construction.

A number of other constraints may also stand in the way, from infrastructure costs paid by developers up front, to a lack of city codes that align with its own infill strategies and affordable housing goals.

“The city’s very progressive inward growth policies are something I’m very personally aligned with,” Werwrath said. “They’re important principles of future growth and environmental sustainability. But to do such an ambitious thing, you need aggressive policies to offset some of the unintended consequences.”

To address the issue, the study offered a list of recommendations, starting with the city and county’s regulatory environment. Proactive zoning, targeted infrastructure development, easing the burden on developers and clarifying annexation strategies stand among them.

In many ways, Werwrath said, local policies determine the cost of construction, and that cost dictates the end price paid by consumers.

“The city and county need to collaborate around their affordable housing responses,” Werwrath said. “It’s not too late. This is really an issue that’s on the cusp, but a concerted effort can make a big impact in a short amount of time.”

A number of community partners joined on the study, including Missoula County and the city of Missoula, along with the Chamber of Commerce and the Missoula Building Industry Association.

“More and more families are priced out of Missoula,” said Sam Sill, the public affairs director for the Missoula Organization of Realtors. “As a result, Missoula is in danger of becoming less diverse and inclusive, which is at odds with our community values.”